["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nSustainable finance has emerged as a critical instrument for addressing the dual challenges of climate change and sustainable development. Nonetheless, a substantial financing gap persists, while the concept remains under‐theorized without a universally accepted definition, and empirical evidence of its effectiveness remains inconsistent and fragmented. This study undertakes a systematic literature review of 143 high‐quality academic literature screened by high‐ranking journals according to the Academic Journal Guide of the Chartered Association of Business Schools (ABS). Employing bibliometric techniques and network clustering analysis, it traces the evolution of research trends and qualitatively analyzes the thematic clusters of research on sustainable finance and policy. The review highlights gaps in knowledge regarding the interactive roles of environmental policy and financial mechanisms—spanning both public and private sources—and the pathways at multiple levels through which innovation mediates sustainable development. The findings underscore the need for more robust theoretical frameworks, stronger empirical case studies, and systematic integration of sustainable finance mechanisms to assess their complementarity and ensure their effectiveness. Owing to complexity of the practice, the review further stresses the importance of interdisciplinarity and suggests that business and management, economics and finance research cross‐pollinate ideas and approaches with other fields. Future research agenda include (i) the dynamic interaction between financial instruments and policy design, (ii) the drivers and barriers shaping the capacity to foster technology and process innovation, (iii) empirically grounded case studies in less developed contexts, and (iv) the role of international financial institutions in accelerating sustainable development.\n"]